It looks like Haverty Furniture Companies, Inc. (NYSE:HVT) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Haverty Furniture Companies' shares on or after the 27th of November, you won't be eligible to receive the dividend, when it is paid on the 13th of December.
The company's next dividend payment will be US$1.30 per share, on the back of last year when the company paid a total of US$2.20 to shareholders. Based on the last year's worth of payments, Haverty Furniture Companies stock has a trailing yield of around 6.9% on the current share price of $31.74. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Haverty Furniture Companies has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Haverty Furniture Companies's payout ratio is modest, at just 29% of profit. A useful secondary check can be to evaluate whether Haverty Furniture Companies generated enough free cash flow to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that Haverty Furniture Companies's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Haverty Furniture Companies's earnings have been skyrocketing, up 32% per annum for the past five years. Haverty Furniture Companies is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Haverty Furniture Companies has delivered an average of 30% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Should investors buy Haverty Furniture Companies for the upcoming dividend? Haverty Furniture Companies has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Haverty Furniture Companies, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 2 warning signs for Haverty Furniture Companies that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.